Friday, November 16, 2012

Arch Crawford – Is A Crash Coming Your Way?

from FinancialSurvivalNet
Arch Crawford of Crawford Perspectives, renowned financial astrologist, sees very troubled times ahead. He believes that a financial crash is imminent. His predictions have often been spot on. Now he believes we’re entering a new period of changing weather patterns, market meltdowns and political tyranny. While you can’t necessarily set your watch to Arch’s predictions, they can be extremely instructive and profitable. Arch believes that being short the market at this time is a good bet. The major indexes have just broken through their 200 day moving averages and that’s always an important event. Combined with the current astrological formations, and he may be on to something.
Click Here to Listen to the Audio

This $14 Billion Hedge Fund Indicator is Flashing 'Sell'

The DeMark Sequential is a popular indicator among market professionals. It is designed to pinpoint potential tops and bottoms in any market. It is available by subscription to large investors using expensive Bloomberg terminals and other professional trading tools.

According to a recent article in Bloomberg magazine, Steve Cohen uses the indicator to help run his $14 billion hedge fund empire. Cohen has delivered average returns of about 30% a year over the past 20 years, and has invested in the company that developed this unique indicator.

Tom DeMark described the rules in a book titled, The New Science of Technical Analysis. The rules have been expanded since they were first published in 1994, but the old rules can be amazingly accurate at times.

The chart below shows recent trading signals on PowerShares QQQ (NASDAQ: QQQ).
QQQ Chart
Traders tend to get carried away and take trends too far in the short term. The Sequential is a way to define when this happens. The exact rules will sound confusing at first, but for a sell signal, like the one shown in September on QQQ, the DeMark Sequential is trying to identify an extremely overbought market.

The DeMark Sequential begins with a setup. For sell signals on a daily chart, the setup involves identifying nine consecutive daily closes that are higher than the close was four days earlier. Once the setup is complete (shown with boxes in the chart above), the sequential countdown begins.
The first time the price closes higher than it did two days ago, the bar is assigned a value of 1. The next close that is higher than the one that occurred two days earlier is assigned a value of 2 and so on. When the countdown reaches 13, it is time to look for a sell signal. That signal (a red arrow on the chart) is given when the price closes lower than the close from four days ago.

Buys are the exact opposite with the setup requiring nine consecutive days where the close is lower than it was four days ago. The countdown moves toward 13 when the close is lower than it was two days ago. Buy signals (blue arrows on the chart) come after the price closes higher than it was four days ago once the countdown reaches 13.

Testing on QQQ using only the Sequential to enter and exit the market shows that there have been eight buy signals and each has been a winner. For SPDR S&P 500 (NYSE: SPY) and SPDR Dow Jones Industrial Average (NYSE: DIA), 75% of the buy signals have been winners.

Sell signals have been accurate only about 50% of the time for those ETFs if the position is held until a Sequential buy signal is recorded. Profitability of short signals can be improved to 100% for QQQ by only taking the signal if the market continues lower for another two days, confirming that the uptrend has reversed.

Currently, Sequential is signaling a sell on SPDR S&P Homebuilders (NYSE: XHB). Homebuilders have been a market leader, and a reversal in this sector could be a warning that the bull market is near an end.
XHB Chart
Short trades are always high risk and some traders may prefer to use put options to benefit from market declines. January $25 puts on XHB are attractively priced at about $1.15. They would break even if XHB falls below $23.85. There is support near $23, and if XHB declines to support, the options would be worth at least $2. The risk is limited to the price paid for the options.

Trading professionals are responsible for buying or selling thousands or millions of shares at a time. Because they require deeper markets than individual investors, it is not surprising that they rely on different market tools. DeMark Sequential is an institutional favorite and thousands of market pros are seeing a sell signal in homebuilder ETFs. Now could be a good time for individual traders to open a short position in XHB.

Recommended Trade Setup:
-- Buy XHB Jan 25 Puts at $1.25 or less
-- Set stop-loss at $0.65
-- Set initial price target at $2 for a potential 60% gain in two months

Charting The Secular Decline (To Come) In Advanced Economy House Prices

from Zero Hedge
It would appear that Americans are in general an optimistic bunch. The slightest green shoot of economic growth, or market trend-reversal, or Tigers’ home run in the World Series and it is instantly extrapolated into “what could be”. The US housing market (among others around the world) is just such a glimmer of hope (and homebuilder stock prices surely provide all the proof you need… just like JCP’s 12% jump on 9/19? followed by its 46% decline since…). The trouble is, no matter how much you want something to happen; sometimes, there really is no way it’s ever gonna happen. To wit, the young/old dependency ratios in the following six major economies of the world suggest whatever ‘Eastman Kodak’ bounce some housing markets are experiencing will inevitably be short-lived (no matter how much foreign cash is driven back into these advanced economies).
Continue Reading at…

3 Reliable Indicators Show It's Time to Buy Gold for a 10-Point Move

Short-term trading can be profitable, but can also require a great deal of time to find trades and then execute them in fast-moving markets. Because of those challenges, I also look at long-term trading opportunities, hoping to find positions that can be held for six months or more. To do this, I rely on a 26-week rate of change (ROC) strategy that has delivered steady gains over time.

Occasionally, there will be times when signals that work in the long term also highlight short-term trading opportunities. When that happens, the strategy of buying on a pullback can add to the profits.
Buying pullbacks was a popular strategy in the bull market of 1982 to 2000. Because it was a long-term bull market, buying on a short-term decline helped traders increase their gains. Since 2000, traders have endured two bear markets where buying pullbacks has not worked as well and has more often led to larger losses as prices continued falling. Since buying pullbacks can be so profitable in a bull market, traders should try to minimize the chances of buying into bear markets by following several indicators.

We can start by using the 26-week moving average (MA) as a trend filter. If prices are above the MA, then we can consider the stock or ETF to be in an uptrend, which is the best time to buy pullbacks.
Risk can also be decreased by only buying when the relative strength (RS) is greater than 80, meaning the stock or ETF has outperformed 80% of the market.

Finally, we can use the Momentum of Comparative Strength (MoCS) to pinpoint the time to buy. MoCS converts RS to a MACD-style indicator and offers clear buy signals.

All of these conditions are met now and signaling that it is time to buy SPDR Gold Shares (NYSE: GLD).
GLD Chart
GLD has been confined to a trading range between $150, which is acting as support, and $174, which has offered resistance over most of the past year. The rounding bottom pattern formed during that range offered an upside price target of $174, the resistance level that stopped the recent advance.
Prices then pulled back but held above the 26-week MA. RS is now at 95, and MoCS just gave a buy signal.

In the past when MoCS has signaled a buy, GLD has generally delivered strong gains. A month after these signals, prices have moved up by about 5%, and 68% of the trade signals have been winners. That would put GLD on target to reach $174 by the end of November.

Three months after a signal, GLD has delivered an average gain of 10%. The 26-week MA could be used as a trailing stop, initially risking 3.8% on the trade, but the stop should move higher with gains in GLD.

Recommended Trade Setup:
-- Enter buy stop order on GLD at $168.10
-- Set initial stop-loss at $161.64
-- Set price target at $184 for a potential 10% gain in three months

Monsanto Company (NYSE: MON)

A Head and Shoulders (H&S) pattern is a reversal pattern that forms after an uptrend. A textbook H&S pattern starts to form when a stock rallies to a point and then pulls back to a particular level (left shoulder). Next, the stock will rally again, but this time to a higher peak (head) than the previous one. After forming the head, the stock will pull back to the same support that the first shoulder did. Finally, the stock rallies a 3rd time, but not as high as the head (right shoulder). The level that has been created by all 3 of the pullbacks is simply a support level referred to as the “neckline”. The formation of an H&S pattern warns of a potential reversal of the uptrend into a possible downtrend.

Monsanto Company provides agricultural products for farmers. It operates in two segments, Seeds and Genomics, and Agricultural Productivity. The Seeds and Genomics segment produces row crop seeds, including corn, soybean, cotton, and canola seeds principally under the DEKALB, Channel, Asgrow, and Deltapine brands; vegetable seeds consisting of tomato, pepper, melon, cucumber, pumpkin, squash, beans, broccoli, onions, and lettuce seeds under the Seminis and De Ruiter brands. This segment also develops biotechnology traits that assist farmers in controlling insects and weeds under the SmartStax, YieldGard, YieldGard VT Triple, VT Triple PRO, and VT Double PRO, as well as Bollgard and Bollgard II, Roundup Ready and Roundup Ready 2, and Genuity brands. The Agricultural Productivity segment manufactures herbicides for agricultural, industrial, ornamental, turf, and residential lawn and garden applications for weed control, as well as for control of preemergent annual grass and small seeded broadleaf weeds in corn and other crops under the Roundup and Harness brands.

To review the H&S pattern that has formed on Monsanto's stock, please take a look at the 1-year chart of MON (Monsanto Company) below with my added notations:
1-year chart of MON (Monsanto Company)
MON had been on a 5-month rally since its April-May correction. However, over the last (3) months, MON has created a very important level at $85 (navy), which would also be the “neckline” support for the H&S pattern. Above the neckline you will notice the H&S pattern itself (red). Confirmation of the H&S occurred yesterday when MON broke its $85 “neckline”. The stock should be moving lower from here.

A left-for-dead technology stock could be starting a major long-term breakout - YHOO

Something crazy is going on in the tech space. Maybe it is Marissa Mayer, or maybe just the relief of uncertainty, but Yahoo, $YHOO, looks like a long term buy. Earlier this year many jumped on board when Marissa Mayer took over as CEO. The daily chart below shows that action. Technically the break over 16.40 triggered a buy signal with a target on the break of the wedge higher at

18.70. Now solidly on the path to that target a pullout to the bigger monthly picture is starting to look very juicy. This monthly view shows a push through the 23.6% Fibonacci level at 17.09 and now a test of resistance coming at 18.20 at the top of an ascending triangle. A push through carries a target on the pattern break to 24.80. That is a big move. Achieving that target would put it squarely in the middle of the 38.2% and 50% Fibonacci levels retracing back to the move off of the 2006 high, basically bringing the 26.22 level into play as well.

Panic Selling in High-Yield Fund Could Allow You to Bank Double-Digits

The equity markets are moving away from risk, and ever since traders turned their attention from the election to more significant unknowns, the de-risk trade has been in full effect. This is true of the equity markets at large, but it's especially true of many stalwart "safe" high-yield sectors such as utilities.

But why have high-yield funds suffered the wrath of sellers?

Well, now that President Obama has won a second term, there is very real fear that taxes on the wealthy, and particularly taxes on dividend income, will go up. The so-called "fiscal cliff" negotiations have yet to begin, but the president already has said that a deal must include an increase on the wealthiest 2% of Americans. If you take out your politico-speak translator, what this really means is the likelihood of a jump in tax rates, including a big increase in the dividend tax rate from the current 15% to nearly 40%.

The likelihood of such a tax surge is in part the driving force behind many a high-yield fund sell-off during the past week, but in my view, the level of panic selling in some funds means a very attractive buying opportunity.

One high-yield fund I am particularly fond of is the Gabelli Global Gold, Natural Resources & Income Trust (NYSE: GGN). This is a closed-end fund that invests in companies in the gold mining industry, including industry stalwarts such as Barrick Gold (NYSE: ABX), Goldcorp (NYSE: GG) and Newmont Mining (NYSE: NEM), to name some of the fund's top holdings.

What makes this fund unique, and what gives it a very attractive income stream, is the strategy employed by management. This involves the writing (selling) of covered call options on the equity securities in its portfolio. The strategy has resulted in the fund's ability to generate about a 12% yield, and along with the potentially huge upside in metals and mining stocks the sector is capable of, makes GGN a compelling high-yield gold play fit for both income investors -- and now especially for traders.
GGN Chart
The reason this fund is fit for traders can be seen with one glance at the chart. GGN shares have plunged more than 12% in just the past week. That decline is no doubt due to the fear of higher dividend taxes, but it's also due to what's been called the "panic investing cycle."

My friend and colleague, Doug Fabian, editor of the Successful Investing and High Monthly Income newsletters, describes this cycle as follows:

"The panic investment cycle is a migration in emotion from optimism to excitement, then thrill, and then virtual euphoria about how well things are going. Unfortunately, in the absence of the proper risk management tools, this emotion usually morphs into anxiety once an investment begins to break down. That anxiety then becomes denial, and it is at this point that the fear factor invades. Soon after the fear comes the panic selling, and it is at this capitulation point, when nearly everyone is despondent, that the real opportunity for income investors presents itself."

I suspect that we are very near this point in GGN, especially with this natural resources fund at multi-year lows. Smart traders can buy into this panic profit opportunity now, before the fiscal cliff and tax issues are resolved. Because even if there is a marked tax increase on dividend income, the beaten-down price of GGN means getting in on this fund during the fear portion of the panic cycle -- and that's nearly always a winning trade.

Recommended Trade Setup:
-- Buy GGN at the market
-- Set stop-loss at $11.34
-- Set initial price target at $14.50, just above the 200-day moving average, for a potential 18% gain in two months